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Weekly Market Update for April 5, 2024

by Vinicius d’Avila, Research Associate

The market was closed last Friday for the holidays when the Personal Consumption Expenditures index (the Fed’s preferred inflation gauge) was released. The headline inflation measure read 2.5% for the trailing year, with “core” inflation (which excludes more volatile food and fuel prices) at 2.8%. The reading is much milder than in 2022 – when headline inflation peaked at 7.1%, with a 5.6% core measure on an annual basis – but remains above the Federal Reserve’s target of 2%.

February’s Job Openings remained steady at 8.76 million, according to the Job Openings and Labor Turnover Survey (JOLTS) released on Tuesday. The jobs report for March (released this Friday) showed a stronger-than-expected labor market, with US employers adding over 300,000 new hires, marking the 39th consecutive month of job growth. The unemployment rate ticked down to 3.8%, and hourly earnings were in line with expectations (up 4.1% on a yearly basis).

While there should be caution when relying on any data point, some investors are hesitantly optimistic that the Federal Reserve has shown a balanced approach to cool inflation without squeezing the labor market too tightly. The expectation remains for the Fed to hold rates steady for the next meeting in May, with markets expecting a rate cut later this summer.

Israeli airstrikes in the Gaza Strip and the Iranian embassy in Syria added some volatility to the market this week, with the Nasdaq closing -0.80% and the S&P 500 -0.95%. The 10-Year Treasury moved higher this week (+20 bps to 4.40%) following strong labor market data, with the 6-month Treasury yield at 5.33%.

Next week should be busy on the economic front, with the March CPI release out next Wednesday and the PPI report the day after. Wells Fargo and JP Morgan will announce their quarterly earnings results next Friday, marking the unofficial beginning of the First Quarter earnings season.

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